NextEra Energy (NYSE:NEE) Partners (NYSE:NEP) experienced a significant drop in share value this week, with its shares falling by 29.3%, according to InvestingPro data. This followed a 35% decline the previous week, prompted by a reduction in the company's dividend growth model. The change was triggered by the surge in 10-year Treasury bond yields to 4.8%, leading NEP to scale back its dividend growth outlook from 12-15% to 5-8%.
The share price drop led to the cancellation of a "drop-down" project sale and further analyst downgrades. Wells Fargo notably reduced its price target for NEP from $80 to $33, reflecting the market's growing concern over the company's fate.
In an attempt to navigate the challenging financial landscape, NEP used its revolving credit line to acquire a stake in South Texas Midstream, a firm it co-owns. This move has led to increased investor apprehension. According to InvestingPro Tips, the company has been quickly burning through cash, which could be a contributing factor to this apprehension.
As a consequence of these events, NEP's dividend yield soared to 15.7%, and the stock, which has declined almost 70% year-to-date, now trades at just over half its book value. In fact, the company's dividend yield has grown by 16.59% in the last twelve months, as per InvestingPro Data.
Given the predicament surrounding the yieldco model, NEP management is reportedly considering alternative strategies. This comes as the company seeks to stabilize its position and reassure investors amidst turbulent market conditions. One of the strategies could be to capitalize on the fact that NEP is trading at a low Price / Book multiple, as indicated by InvestingPro Tips.
Despite the recent downturn, it's worth noting that NEP has raised its dividend for 9 consecutive years, according to InvestingPro Tips. This could be a sign of the company's commitment to provide returns to its shareholders, even in challenging times.
For more insights like these, investors can check out InvestingPro, which offers numerous additional tips and real-time metrics for companies like NEP. With InvestingPro, investors have access to a wealth of information to help them make informed decisions. To learn more, visit InvestingPro Pricing.
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